Sanral might need new cash injection

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16/01/2012
The infamous coloured lights of a Sanral tolling gantry can be seen illuminating Gautengs roads during the night.
Picture: Ihsaan Haffejee

Sanral will probably need another government bailout later this year if the Gauteng tolling dispute continues.

“The minister of finance has indicated that another appropriation bill may be necessary,” said Andrew Donaldson, the National Treasury’s deputy director-general for public finance.

If the tolls are halted, he said the government would have to come up with more than just the R2 billion to R2.5bn in lost toll revenue but enough to cover the full interest cash costs and compensate for maturing debt, which could be R3.5bn to R4bn.

Sanral is facing difficulty not just because of the loss of toll revenue from the Gauteng Freeway Improvement Project (GFIP), but also because it hasn’t been able to raise money on the open market since last year because of the tolling dispute, said Donaldson.

On March 28, Sanral received a R5.75bn bailout, out of the 2011/12 budget, two days after the gazetting of the Additional Adjustments Appropriation Act, which authorised this specifically to cover the cost of debt incurred on the GFIP.

On April 28, the Pretoria High Court ordered the suspension of the start of tolling on the GFIP, pending a review of the decisions to toll those freeways.

The Treasury and Sanral have filed an application for leave to appeal against this decision in the Constitutional Court, which will be heard in August. In their Concourt papers, both Minister of Finance Pravin Gordhan and Sanral CEO Nazir Alli said the R5.75bn bailout had been spent on Sanral’s operational expenses rather than on debt reduction. Gordhan said the GFIP debt was about R20bn.

That R5.75bn was the equivalent of about 21 months of the anticipated revenue from the Gauteng tolls of R270m a month.

The Star asked the Treasury and Sanral to explain how the bailout was spent. Donaldson said the full R5.75bn went into Sanral’s toll road budget, which is separate from its non-toll budget. “There’s a consolidated toll business, of which the GFIP is a very large part. But the GFIP has no revenue yet,” he said.

So that R5.57bn reduces the GFIP debt requirement in accounting terms, but it also provides the cash to cover interest, operating expenses and debt redemptions of the whole toll business, said Donaldson.

It thus both reduces Sanral’s debt and provides the cash for operational costs, but it can’t compensate for the loss of toll revenue indefinitely.

Sanral receives money for the toll business both from tolls and from borrowing money on the open market.

But since about the middle of last year, Sanral hasn’t been able to borrow for any of the toll businesses because of the GFIP dispute.

This becomes more of a problem as Sanral’s long-term debts mature and have to be repaid, as they can’t be replaced.

Donaldson said: “Tolls only start paying off the interest five to six years down the track.”

So the ability to raise money on the open market is crucial.

Donaldson said Sanral was facing running out of money by the end of this year or early next year, which could necessitate another bailout.